Bridges • Volume 12 • Number 5 • November 2008

New Case Urged to Examine Science in Hormones Dispute

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In an important ruling on the long-running beef hormones dispute, the Appellate Body has clarified procedural issues with regard to trade retaliation, as well as the standard of review that panels must apply when hearing cases that involve health risk assessments.

The dispute pertains to the European Union’s import prohibition on beef treated with growth hormones. In 1998, the WTO ruled that the EU had not proved that the six hormones at issue caused ill-effects to human health due to the consumption of hormone-treated meat as required by the Agreement on Sanitary and Phytosanitary (SPS) Measures. After the EU failed to either repeal the ban or to present fresh evidence justifying it, the WTO in July 1999 authorised complainants United States and Canada to apply trade retaliation worth US$177 million and US$9.5 million respectively. The sanctions are still in place.

In 2003, however, the EU notified to the WTO that it had conducted new risk assessments showing that the disputed hormones presented enough potential threats to human health to uphold the ban. Its Directive 2003/74/EC reflected this conclusion and, the EU said, put it in full compliance with the requirements of the SPS Agreement. All retaliatory measures should thus be lifted. Instead of asking the WTO to examine the new scientific evidence, the complainants dismissed the EU’s claim of compliance and continued to apply punitive duties on European exports.

A dispute settlement panel on the legitimacy of the sanctions requested by the EU issued a mixed verdict in March 2008. On the one hand, it faulted the complainants for maintaining retaliation without having sought a formal WTO determination on whether Directive 2003/74/EC did in fact conform with the requirements of the SPS Agreement. On the other, however, the panel said that the EU’s additional research did not satisfy the SPS Agreement’s definition of a risk assessment, and concluded that scientific evidence did not support the EU’s contention that the consumption of hormone-treated meat led to an increased cancer risk (Bridges Year 12 No.2 page 8).

Both sides appealed this rather confusing and contradictory ruling (Bridges Year 12 No.4 page 14).

Sanctions Legal for Now
At the core of the dispute, the Appellate Body (AB) said, was a disagreement on whether the measure taken by the EU (i.e. Directive 2003/74/EC) had achieved ‘substantive compliance’ with the findings of previous WTO dispute settlement rulings. Only a compliance panel could establish whether that was the case, it suggested.

The AB acknowledged that the parties applying trade sanctions were under no obligation to undertake compliance proceedings. It noted, however, that under Article 22.8 of the Dispute |Settlement Understanding (DSU) retaliatory measures could “only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed,” and if a “disagreement arises as to whether substantive compliance is achieved, the fulfilment of [this provision] cannot be confirmed unless the disagreement is resolved through multilateral dispute settlement.” In fine, the AB ruled that “the suspension of concessions [i.e. retaliatory action] continues to apply pending the outcome of the dispute settlement proceedings concerning the first resolutive condition in Article 22.8.”

The US and Canada welcomed this conclusion, which allows them to continue to apply sanctions until a compliance panel has ruled on the matter.

The Burden of Proof
The Appellate Body then turned to the EU’s contention that only a complainant could initiate compliance proceedings. It established that the avenue was available to either side, and that both shared the “responsibility to ensure that the suspension of concessions [was] not applied indefinitely.” The question was “which party [bore] the burden of proof in respect of the issues of substantive compliance.” The main reason that the countries involved in the beef hormones dispute had been reluctant to seek a compliance determination stemmed from their apprehension that the initiator would bare ‘the full burden of proof’, the AB suggested.

To solve the conundrum, the Appellate Body said that the original defendant should have the responsibility of proving that it had ‘cured the defects’ identified. This, however, would only entail “a clear description of its implementing measure, and an adequate explanation regarding how this measure rectifies the inconsistencies found in the original proceedings.” With respect to all other issues, including the measure’s consistency with WTO rules, the burden of proof would rest upon the original complainant.

Handling of Scientific Evidence Seriously Flawed
The AB reserved its harshest criticism to the panel’s handling of scientific testimony. It castigated the panel for its decision to consult two experts who had a personal stake in finding fault with the EU’s new studies on the adverse effects of the incriminated growth hormones. While the Appellate Body acknowledged that both scientists were eminent specialists in their field, it agreed with the EU’s argument that they should not have been called to provide advice to the panel due to their affiliation – as chairman, vice-chairman and joint rapporteur – with the Joint FAO/WHO Expert Committee on Food Additives (JEFCA), which had evaluated some of the hormones at issue in the dispute.

The panel not just seek the advice of these experts about JECFA’s work and risk assessments; it also asked to them to “evaluate the EU’s risk assessment and they did so using JECFA’s evaluations as a benchmark. This is problematic […] because the EU’ risk assessment called into question the validity of JECFA’s evaluations and explicitly stated that it would not follow them. In the light of this, it was improper for the panel to consult with [scientists], who were directly involved in JECFA’s evaluations.”

The appointment and consultations with the two scientists “compromised the adjudicative independence and impartiality of the panel” and in so doing infringed the EU’s right to due process, the Appellate Body wrote.

The AB also faulted the panel for not taking into account all scientific opinions regarding the harmful effects of the hormones. Instead, it found that the panel seemed to have “conducted a survey of the advice presented by the scientific experts and based its decisions on whether the majority of the experts, or the opinion that was most thoroughly reasoned or specific to the question at issue, agreed with the conclusion drawn in the EU’s risk assessment” [editor’s italics]. Ultimately, the panel reviewed the scientific experts’ opinions and “somewhat peremptorily decided what it considered to be the best science,” thus failing to respect the applicable standard of review under the SPS Agreement. The panel’s flawed approach was particularly evident in its analysis of the genotoxicity of oestradiol 17â, one of the central issues in the EU’s risk assessment, the AB asserted.

These and other procedural failings led the Appellate Body to decide that the panel had “failed to conduct an objective assessment of the facts of the case […] in determining whether the EU’s risk assessment satisfied the requirements” of the SPS Agreement. Accordingly, the AB reversed most of the panel’s key substantive findings, including that the EU had not satisfied the risk assessment requirements under Article 5.1of the SPS Agreement, and the determination that Directive 2003/74/EC was not based on a risk assessment.

Way Forward: New Case
The Appellate Body declined, however, to judge the crux of the matter, i.e. the science underlying the EU’s implementing measures. Instead, it emphasised that given of the ‘numerous flaws’ it had found in the panel’s analysis, it was not in a position to make any findings with regard to the WTO consistency or inconsistency of the EU’s import ban relating to oestradiol-17â or the provisional prohibition it maintains on the other five hormones (the two elements that make up Directive 2003/74/EC).

Because the Appellate Body was unable to complete the analysis as to whether the directive had brought the EU into ‘substantive compliance’, it took the highly unusual step of recommending the launch of a new case. The Dispute Settlement Body should request the protagonists to initiate Article 21.5 (i.e. compliance) proceedings “without delay in order to resolve their disagreement as to whether the EU has removed the measure found to be inconsistent in EC – Hormones and whether the application of the suspension of concessions by the United States remains legally valid,” the AB said. A compliance panel should in principle issue its report within 90 days.